KPI is a numerical indicator of the activity of an association (department, branch) or one employee, which allows the company to assess the effectiveness of the participation of an employee/team in the work of the entire company in order to achieve strategic goals. Simply put, a KPI is a ratio of actual results displayed in numbers.
Automated KPI systems for business processes are implemented as a software solution. They can be used in any industry at any development stage of an enterprise. The program automates the management of activities and employees, as it includes such elements as:
The KPI system helps managers or the owner to monitor the staff, evaluate the efficiency of each employee, and pay wages outside the framework of a fixed salary, based on the actual result.
It is important that in order to use a software solution it is not at all necessary to install software on the company’s computers, therefore the risk of conflicts and incompatibility of hardware is eliminated. It is enough to connect your computer to the Internet. Monitoring is carried out in real time through a remote server using a browser. It is also possible to use the software solution through a mobile application.
Often, uninformed users compare KPIs with the Balanced Scorecard. But this is not the case. The coefficient KPI is indirectly related to the BSC. But only indirectly. The Balanced Scorecard displays goals. Yet the key metrics of KPI display digital data on the achievement of goals.
Interesting fact: What is KPI in practice? Feedback on the use of the automated KPI system confirms that, while using this tool, the manager does not intuitively define, but documents the role of a particular employee or department in achieving a strategic goal. Top management and department heads who get such a tool in hand really manage the staff, instead of doing all the work for them. And ordinary employees at enterprises working with piece-rate pay see how much they have already earned at any given time, how much needs to be done to fulfill the plan and to reach the highest possible level of remuneration. A transparent system of material incentives appears. There are no questions about which employee should be awarded, since the salary is calculated based on the result. The activity of the team is reoriented from performing processes to achieving results.
What KPI stands for is clear. And what metrics can we display using performance indicators?
When setting up a software solution for a specific business, it is important to comply with the conditions:
In order to understand how to calculate the KPIs, let's consider the example of calculating the key metrics of the warehouse of an online store. In this case, it is important to identify the main indicators that will be monitored.
First, we identify the goods to be delivered according to the delivery plan. Then, the data on warehouse employees and their working conditions will be entered into the program. We also take into account recommendations for the movement of warehouse goods, rules for processing applications, plans for shipment of orders through a transport company. Once you know what the company is aiming for, you can measure it digitally using formulas or other means. To be more clear, let’s demonstrate some possible key performance indicators:
You can also generate a cost indicator:
The software solution allows you to form an indicator of related expenses.
If you are interested in compliance with work standards, you can configure the program to display the corresponding indicator.
What are some examples of personnel KPIs? If it is important for the owner or manager to calculate efficiency, they can analyze the results and the time spent on achieving those. Let's take the average number of requests processed by the warehouse per week as the productivity ratio. Then:
Any business related key metrics can be calculated this way. An example of KPIs could be the assessment of the effectiveness of projects or departments.
Consider the use of software in a planning and control department. Since the business KPI measures the ratio of the result and the cost, the tool can be used for planning and control. Planning indicators in the same warehouse can be the percentage of orders completed and the percentage of orders sent to customers on time. When the reporting period is over, the actual values are measured. If there is a noticeable difference between the planned and the actual result, we analyze the reasons that led to the disagreement. This allows you to plan corrective mechanisms.
The company's short-term and long-term strategy is based on the analysis of activities and results. When planning is done intuitively, without understanding the actual indicators and in isolation from the actual performance, you may not be able to achieve the strategic goals. The plans of your organization will change, the development strategy will transform arbitrarily.
If you use KPI systems for a project, it is easier to avoid such consequences. The indicators used in the KPI system reflect the real processes that determine all the activities of the company.
It is important that the analysis of KPI indicators becomes an effective element of staff motivation. This is due to the fact that the planned and actual values of employees' activities are recorded. Data analysis allows the manager to understand what to reward the employee for, how to motivate him. And the staff, in its turn, understands what remuneration they will receive, how to arrange activities in order to fulfill the plan, and for what to expect a decrease in the amount of remuneration.
Many companies are ready to use software-based KPI solutions, but certain factors stop them:
This can really be an obstacle for the implementation of a KPI system. It is simple to avoid this situation - you can use a ready-made service with the following capabilities:
Let us present you the Waytobi solution. The service:
You can learn more about the automated KPI system from Waytobi by contacting our project managers. We will be glad to answer your questions.
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